New ask Hacker News story: Ask HN: Cash or equity?
Ask HN: Cash or equity?
6 by birdinhand | 12 comments on Hacker News.
I've got a major career decision to make and I'm really sweating over it. I can choose between enough salary to cover my expenses and 50K stock options in a SF startup that is in the process of closing a $100M round with prominent companies and VCs in the valley. The stock will either be worthless or, up to 1.6M if the company manages to 10x it's current value. At current value, the options would be "worth" $135,000 after paying the strike price. Given the laws in my country of residence there would be no taxes on either exercise or selling the shares. Or I can choose $400K in after-tax income over the same 4 years. I think the company has good prospects of succeeding, and they'll certainly have the funding for it. They're in the nice hockeystick part of the growth curve. But nothing is for certain, and there's always ways it can go wrong. How does a person even begin to make a sensible decision about something like this? I made some spreadsheets, entered some made up probabilities and the math tells me choose the equity. Everyone else tells me take the money. If I had $400K in cash, I wouldn't spend it all on shares in this company - it seems to risky to me. That's an amount I would definitely miss if I lost it, and it's fully undiversified. Heck I wouldn't even put $400K into just Apple or just Google, and they're a lot less risky! But the smart money may be to take the risk. What would you do?
6 by birdinhand | 12 comments on Hacker News.
I've got a major career decision to make and I'm really sweating over it. I can choose between enough salary to cover my expenses and 50K stock options in a SF startup that is in the process of closing a $100M round with prominent companies and VCs in the valley. The stock will either be worthless or, up to 1.6M if the company manages to 10x it's current value. At current value, the options would be "worth" $135,000 after paying the strike price. Given the laws in my country of residence there would be no taxes on either exercise or selling the shares. Or I can choose $400K in after-tax income over the same 4 years. I think the company has good prospects of succeeding, and they'll certainly have the funding for it. They're in the nice hockeystick part of the growth curve. But nothing is for certain, and there's always ways it can go wrong. How does a person even begin to make a sensible decision about something like this? I made some spreadsheets, entered some made up probabilities and the math tells me choose the equity. Everyone else tells me take the money. If I had $400K in cash, I wouldn't spend it all on shares in this company - it seems to risky to me. That's an amount I would definitely miss if I lost it, and it's fully undiversified. Heck I wouldn't even put $400K into just Apple or just Google, and they're a lot less risky! But the smart money may be to take the risk. What would you do?
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